Ireland’s milk production slows down amid price pressures

Ireland’s dairy sector hit a noticeable slowdown in September to its weakest performance since February, despite strong momentum earlier in the year. Milk solids were more resilient, but price pressure intensified as oversupply pushed Irish farmgate prices down. Falling farmer returns are now creating liquidity concerns. Poor weather has added further strain, resulting in early housing and increasing reliance on feed. Meanwhile, uncertainty over the future of the Nitrates Derogation poses a structural threat to production in the years ahead.Ireland’s milk production faced a sharp slowdown in September, with output totaling 797,700 tons in September. This represents a slight 0.9% increase over the previous year, decelerating significantly from the 6.47% observed in August and the lowest growth since February. Solids production remained more resilient, particularly due to a higher fat content, resulting in a milk solids output increase of 1.37% year-on-year to 68,040 tons.Despite the September setback, performance across September remains strong. Cumulative milk production grew by 5.71% over the previous year to 7.59 million tons, supported by a good performance in the spring and summer seasons. Cumulative milk-solids output increased by 6.37% to 588,730 tons, reflecting both production and milk quality gains.Oversupply resulted in price pressureThe abundant supply of milk from Irish, regional, and international markets placed increased pressure on farmgate milk prices. Prices were elevated at the beginning of the year, declining rapidly until May and remaining relatively stable since then. Yet again, the previous year’s baseline continued to increase, narrowing the price gap as the year progressed.September marked a turning point, with prices reaching €51.86 per 100 kilo, the first month with a negative price development over the previous year (-10.56%). The price correction contrasted notably with the price development in the EU, which increased by 7.66% to €53.41 per 100 kilo in the same month.This decline resulted from price cuts from Irish processors observed in late summer and early autumn for three consecutive months between July and September. By October, processors, such as Dairygold, Centenary, and Lakeland, reported declines between 3 and 4 cents per liter from their base prices. This means that prices could be nearing or going below the national average production cost (42 cents per liter).For many farmers, the falling margins represent notably worse conditions for production in comparison with the stable environment observed in the first half of the year. The September price contraction positions Ireland’s Q4 performance on a much weaker footing compared to the EU.Tightening margins portray liquidity challenges for farmersFalling farm gate prices could set farmers’ profits below the cost of production in 2026, according to the Irish Farm Accounts Co-operative Society (IFAC). Advisory bodies have recommended that farmers focus on cash-flow planning in preparation for liquidity challenges next year.The falling margins are coupled with relatively high input costs, especially feed, fertilizer, and energy. This could result in short-term financing challenges for certain farmers and could affect productivity in the long run as the country transitions to winter.Beyond market pressures, milk output has been affected by unfavorable weather conditions in autumn. September and early October observed increased rainfall, resulting in high water saturation throughout the country. As a result, several herds were moved indoors earlier, increasing their reliance on feed and conserved forages, and reducing the overall efficiency of production. Pasture development also reports underperformance, raising the risk for a lower forage supply in 2026.Regulatory uncertaintyAdditionally, the future of Ireland’s Nitrates Derogation remains a critical concern for the whole industry. The derogation is set to expire at the end of 2025, with negotiations for its renewal or revision still in progress. Several stakeholders from the Irish dairy sector, such as farmers, industry groups, and policymakers, have highlighted that the loss of the derogation could result in significant reductions in herd size and adjustments in the utilization of land in Ireland.